Healthcare: Foulger Pratt exec discusses medical office market

State of Medical Office Market

Calkain interviewed Michael Abrams – President of Foulger Pratt Rockledge Medical Properties – concerning the medical office market.

Calkain: As a developer, what is your prediction of demand for new medical condominiums in the Washington Metro area for the next year or two?

Michael Abrams: There are several conflicting forces impacting the medical condo market over the immediate and near term. On the positive front, certain financing markets are becoming very attractive with practices able to borrow funds at about 5% and up to 90% of the project cost. This compares favorably with the cost to lease. Physician practices have also experienced generally good conditions compared to other aspects of the economy which have suffered worse over the past few years. For example you don’t hear about large layoffs by hospitals or physician groups. However, healthcare uncertainty – while better since the passage of the 2010 healthcare bill – still permeates the decision making process for individual practitioners.

Calkain: As you know, there are significant shifts impacting medical delivery systems: outsourced medical services from hospitals, the advancing age of the baby boomer generation, the recent healthcare legislation. Can you comment on the impact of these trends on developing medical buildings?

Michael Abrams: We see a trend toward consolidating practice groups into larger sizes and toward greater hospital employment of physicians. Both of these trends point away from the condo model as a vehicle for physician occupancy. Larger groups tend not to own in this manner and hospitals tend to own entire buildings or lease space. We anticipate a greater orientation by health care systems to delivering services off campus in integrated settings where a variety of medical services are provided in a more unified way rather than a building with a collection of unrelated physicians who may or may not be part of an integrated approach to care.

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